Eurointelligence: Portugal brags about EFSF terms

Martin Wolf on the eurozone

An interesting column by Martin Wolf on the eurozone, based on a paper written by Paul de Grauwe. He starts by noting that Spain's real interest rate is double that of the UK, which is entirely due to its membership of a monetary union. The ECB supports the banking system, but acts like the IMF: it wants its money back. There are three possible outcomes to the crisis. The first is a fall-back to the gold standard, with its pro-cyclical policies, which will be as unacceptable to European today, as it was in the past. The second will be a break-up, a concentration of the eurozone around countries similar to Germany. And the third will be deeper integration. He predicts they will choose the latter, but it is a political choice.

Since the Euro is being run as if it were already on the gold standard, I predict the first option will be chosen since we're already there.

Economics is politics by other means